CMA Inter Cost Accounting Important Question | Dec 25

Table of Content

1. Introduction to Cost Accounting
2. Material Cost 
3. Employee Cost 
4. Direct Expenses 
5. Overheads 
6. Cost Accounting Standards 
7. Cost Book Keeping
8. Job Costing
9. Batch Costing
10. Contract Costing
11. Process Costing
12. Joint & By-Products
13. Operating Costing or Service Costing
14. Marginal Costing
15. Standard Costing & Variance Analysis
16. Budget and Budgetary Control
17. Theory 

CMA Inter Dec 25 Important Questions Other Subjects Blogs :

1. Important Questions Dec 25 Paper 5 : Business Laws and Ethics
2. Important Questions Dec 25 Paper 6 : Financial Accounting
3. Important Questions Dec 25 Paper 7 : Direct and Indirect Taxation
4. Important Questions Dec 25 Paper 9 : Operations Management and Strategic Management
5. Important Questions Dec 25 Paper 10 : Corporate Accounting and Auditing
6. Important Questions Dec 25 Paper 11 : Financial Management and Business Data Analytics
7. Important Questions Dec 25 Paper 12 : Management Accounting
8. CMA Inter Syllabus (New Updates)
9. CMA Intermediate Online Classes

Introduction to Cost Accounting

Question 1:

The following is the manufacturing and Profit and Loss Account of Anu Limited for the year ended 31.3.2024.

Prepare a statement that classifies the costs into different components based on the information above, taking into account the following factors:

(a) 50% of telephone expenses relate to the office and 50% to sales department;

(b) 20% of salaries relate to the factory, 60% to the office and 20% to the sales department; and

(c) 75% of the establishment expenses relate to the office and 25% to the sales department.

(d) 65% of the electricity relates to the factory and the remaining to the office.

Question 2:

Summarize the objectives of Cost Accounting (any Four).

Question 3:

 The following figures were extracted from the Trial Balance of a company as on 31st December, 2022.

Further details are given as follows:

Closing inventories are Material ₹1,80,000, Work in Progress ₹1,92,000 and Finished Goods ₹1,15,000.

Accrued expenses are Direct Labour ₹8,000, Indirect Labour ₹1,200 and Interest ₹2,000.

Depreciation should be provided as 5% on Office Appliances, 10% on Machinery and 4% on Buildings.

Heat, light and power are to be distributed in the ratio of 8: 1: 1 among factory, office and distribution respectively.

Rates & Taxes apply ⅔ rd to the factory and ⅓ rd to office.

Depreciation on building to be distributed in the ratio of 8: 1: 1 among factory, office and distribution respectively.

Prepare a Cost Sheet showing all important components and also a condensed Profit & Loss Account for the year.

Material Cost

Question 4:

Question 5:

An invoice in respect of a consignment of chemicals A and B provides the following information :

A shortage of 500 kgs. in chemical A and 320 kgs. in chemical B is noticed due to normal breakages. You are required to COMPUTE the rate per kg. of each chemical, assuming a provision of 2% for further deterioration.

Employee Cost

Question 7:

GZ Ld. pays the following to a skilled worker engaged in production works. The following are the employee benefits paid to the employee:

The company normally works 8-hour a day and 26-day in a month. The company provides 30 minutes lunch break in between.

During the month of August 2020, Mr.Z works for 23 days including 15th August and a Sunday and applied for 3 days of casual leave. On 15th August and Sunday he worked for 5 and 6 hours respectively without lunch break.

On 5th and 13th August he worked for 10 and 9 hours respectively.

During the month Mr. Z worked for 100 hours on Job no.HT200.

You are required to CALCULATE:

(i) Earnings per day

(ii) Effective wages rate per hour of Mr. Z.

(iii) Wages to be charged to Job no.HT200.

Question 8:

1. ₹ 2,100
2. ₹ 2,160
3. ₹ 2,200
4. None of the above

Direct Expenses

Question 9:

Question 10:

A manufacturing unit produces two products X and Y. The following information is furnished:

Royalty paid on sales ₹54,000 [@ ₹2 per unit sold, for both the products]; Royalty paid on units produced ₹35,000 [@ ₹1 per unit purchased, for both the products], Hire charges of equipment used in manufacturing process of Product X only ₹5,000. Compute the Direct Expenses for product X and Y.

Overheads

Question 11:

XYZ Ltd. manufactures a single product. It recovers factory overheads at a pre-determined rate of ₹20 per man-day.

During the year 20X1-X2, the total factory overheads incurred and the man-days actually worked were ₹35.50 lakhs and 1.50 lakh days respectively. Out the amount of  ₹ 35.50 lakhs, ₹2.00 lakhs were in respect of wages for strike period and ₹  1.00 lakh was in respect of expenses of pervious year booked in this current year. During the period, 50,000 units were sold. At the end of the period, 12,000 completed units were held in stock but there was no opening stock of finished goods. Similarly, there was no stock of uncompleted units at the beginning of the period but at the end of the period there were 20,000 uncompleted units which may be treated as 65% complete in all respects.

On investigation, it was found that 40% of the unabsorbed overheads were due to factory inefficiency and the rest were attributable to increase in the cost of indirect materials and indirect labour. You are required to:

(i) Calculate the amount of unabsorbed overheads during the year 20X1-X2.

(ii) Show the accounting treatment of unabsorbed overheads in cost accounts and pass journal entry.

Question 12:

Suppose the expenses of two production departments A and B and two service departments X and Y are as under:

PREPARE a statement apportioning the costs of service departments over the production departments using step method.

Cost Accounting Standards

Question 13:

Question 14:

Purchase of Materials $80,000 [Forward contract rate $ = ₹80.40 but $ = ₹80.60 on the date of importation], Import Duty paid ₹7,15,000; Freight inward ₹1,92,000; Insurance paid for import by road ₹88,000; Cash discount ₹53,000; Payment made to the foreign vendor after a month, on that date the rate of exchange was $ = ₹82,20. Compute the landed cost of material.

Question 15

Explain the Objectives of Cost Accounting Standard Board (CASB). 

Cost Book Keeping

Question 16:

PR Ltd. manufactures and sells a typical brand of Tiffin Boxes under its on brand name. The installed capacity of the plant is 1,20,000 units per year distributable evenly over each month of calendar year. The Cost Accountant of the company has informed the following cost structure of the product, which is as follows:

Raw Material ₹ 20 per unit.

Direct Labour ₹ 12 per unit

Direct Expenses ₹ 2 per unit

Variable Overheads ₹ 16 per unit.

Fixed Overhead ₹ 3,00,000.

Semi-variable Overheads are as follows:

₹ 7,500 per month upto 50% capacity & Additional ₹ 2,500 per month for every additional 25% capacity utilization or part thereof.

The plant was operating at 50% capacity during the first seven months of the calendar year 2016, at 100% capacity in the remaining months of the year.

The selling price for the period from 1st Jan, 2025 to 31st July, 2025 was fixed at ₹ 69 per unit. The firm has been monitoring the profitability and revising the selling price to meet its annual profit target of ₹ 8,00,000. You are required to suggest the selling price per unit for the period from 1st August 2025 to 31st December 2025.

Prepare Cost Sheet clearly showing the total and per unit cost and also profit for the period.

1. from 1st Jan. to 31st July, 2025

2. from 1st Aug. to 31st Dec, 2025.

Question 17:

Question 18:

JOURNALISE the following transactions in cost books under Non-Integrated system of Accounting.

Question 19:

The following information is available from the Financial Books of SONT Ltd. newly established company for the year ended 31st March 2025,

The cost accounts for the same period reveal that the direct material consumption was ₹56,00,000. Factory overhead is recovered at 20% on prime cost.
Administration overhead is recovered at ₹6 per unit of production. Selling and distribution overheads are recovered at ₹8 per unit sold

Required:

(i) Prepare the Profit and Loss Accounts both as per financial records and as per cost records.
(ii) Reconcile the profits as per the two records.

Job Costing

Question 20:

Question 21:

In a factory following the Job Costing Method, an abstract from the work-inprogress as on 30th September was prepared as under.

Materials used in October were as follows :

A summary for labour hours deployed during October is as under :

A shop credit slip was issued in October, that material issued under Requisition No. 54 was returned back to stores as being not suitable. A material transfer note issued in October indicated that material issued under Requisition No. 55 for Job 118 was directed to Job 124.

The hourly rate in shop A per labour hour is ₹ 3 per hour while at shop B, it is ₹ 2 per hour. The factory overhead is applied at the same rate as in September. Job 115, 118 and 120 were completed in October.

You are asked to compute the factory cost of the completed jobs. It is the practice of the management to put a 10% on the factory cost to cover administration and selling overheads and invoice the job to the customer on a total cost plus 20% basis. What would be the invoice price of these three jobs?

Batch Costing

Question 22:

PS Ltd. manufactures articles in predetermined lots simultaneously. The following costs have been incurred for Batch No. ‘PS143’ in the month of March 2022:

Direct Labour -

Factory overheads are absorbed on a labour hour basis and the rates are

Administrative overheads are absorbed at 10% of selling price. 

The firm expects 25% gross profit (sales value minus factory cost) for determining the selling price. 

You are required to CALCULATE the selling price per unit of Batch No. 'PS143'.

Question 23:

Arnav Motors Ltd. manufactures pistons used in car engines. As per the study conducted by the Auto Parts Manufacturers Association, there will be a demand of 80 million pistons in the coming year. Arnav Motors Ltd. is expected to have a market share of 1.15% of the total market demand of the pistons in the coming year. It is estimated that it costs ₹1.50 as inventory holding cost per piston per month and that the set-up cost per run of piston manufacture is ₹3,500.

(i) Determine the optimum run size for piston manufacturing?

(ii) Assuming that the company has a policy of manufacturing 40,000 pistons per run, Calculate how much extra costs the company would be incurring as compared to the optimum run suggested in (i) above?

Contract Costing

Question 24:

OMEGA LTD undertook a contract for the construction of a building at a contract price of ₹ 45,00,000. During the first year, the following amounts were spent against which a sum of ₹ 16,87,500 (representing 90% of the work certified) was received by the contractor: 

During the second year, the contractor spent the following amounts: 

In the second year, the contract was completed and a sum of Rs.26,25,000 was received by the contractor. 
Prepare the Contract Account and the Contractee Account for both the years and calculate the profits.

Question 25:

Process Costing

Question 26:

“Super Bite” is a leading product in the confectionery market which is obtained after it has gone through three distinct processes — X, Y and Z.

The following information is obtained from cost records of Super (India) Ltd. for the month of July, 2023: 

 Total overheads are ₹ 90,000 which are recovered at 100% of wages.

Required:

Prepare different Process Accounts of the firm for July 2023,

Question 27:

Dairy Wala Private limited’ is engaged in the production of flavoured milk. Its process involve filtration and boiling of milk after that some sugar, flavour, colour is added and then letting it cool to fill the product into clean and sterile bottles. For Producing 10 litre of flavour milk, 100 litre of Raw milk is required, which extracts only 45 litres of standardized milk.

Following information regarding Process – I has been obtained from the manufacturing department of Dairy Wala Private limited for the month of December 20X1:

Joint & By-Products

Question 28:

A company processes a raw material in its Department 1 to produce three products, viz. A, B and X at the same split-off stage. During a period 1,80,000 kgs of raw materials were processed in Department 1 at a total cost of ₹ 12,88,000 and the resultant output of A, B and X were 18,000 kgs, 10,000 kgs and 54,000 kgs respectively. A and B were further processed in Department 2 at a cost of ₹ 1,80,000 and ₹ 1,50,000 respectively.

X was further processed in Department 3 at a cost of ₹ 1,08,000. There is no waste in further processing. The details of sales affected during the period were as under:

There were no opening stocks. If these products were sold at split -off stage, the selling prices of A, B and X would have been ₹ 50, ₹ 40 and ₹10 per kg respectively.

Required:

(i) Prepare a statement showing the apportionment of joint costs to A, B and X.

(ii) Present a statement showing the cost per kg of each product indicating joint cost and further processing cost and total cost separately.

(iii) Prepare a statement showing the product wise and total profit for the period.

(iv) State with supporting calculations as to whether any or all the products should be further processed or not

Question 29:

Operating Costing or Service Costing

Question 30:

PRANO SERVICES Ltd. owns a bus and operates a tourist service on a daily basis. The bus starts from New Town to Sweet Village and return back to New Town the same day. Distance between New Town and Sweet Village is 250 kms. This trip operates for 10 days in a month. The bus also plies for another 10 days between New Town and Rajpur and returns back to New Town the same day. Distance between these two places is 200 kms. The bus makes local sightseeing trips for 5 days in a month covering a total distance of 80 kms per day.

The following data are given below:

• Cost of bus: ₹ 70,80,000, Depreciation: 20% (Charged by Straight Line Method)
• Driver’s salary: ₹ 20,000 p.m.
• Conductor’s salary: ₹ 12,000 p.m.
• Part-time clerk’s salary: ₹ 6,000 p.m.
• Insurance: ₹ 24,000 p.a.
• Diesel consumption: 10 kms per litre @ ₹ 90 per litre
• Token tax: ₹ 36,000 p.a.
• Permit fee: ₹ 4,000 p.m.
• Sundry expenses: ₹ 5,389 for the month
• Lubricant oil: ₹ 800 for every 200 kms.
• Repairs and maintenance: ₹ 17,236 per month
• Normal capacity of the bus: 60 passengers

While plying to and fro Sweet Village the bus occupies 90% of the capacity and 80% while it plies between New Town to Rajpur (both ways). In the New Town, the bus runs at full capacity. The company earns a profit margin of 25% on takings. (Ignore interest & taxation).

You are required to calculate:
(i) The bus fare rate to be charged to Sweet Village.
(ii) The total earnings from local trips per passenger.

Question 31:

Marginal Costing

Question 32:

VAZIR LLP. produces a single product called the ‘Checkmate’. The following figures relate to the ‘Checkmate’ for the period: 2021 -2022.

Question 33:

Standard Costing & Variance Analysis

Question 34:

A single product company sells its product at ₹ 60 per unit. In 20X3, the company operated at a margin of safety of 40%. The fixed costs amounted to ₹ 3,60,000 and the variable cost ratio to sales was 80%.

In 20X4, it is estimated that the variable cost will go up by 10% and the fixed cost will increase by 5%.

(i) Find the selling price required to be fixed in 20X4 to earn the same P/V ratio as in 20X3.

(ii) Assuming the same selling price of ₹ 60 per unit in 20X4, find the number of units required to be produced and sold to earn the same profit as in 20X3.

Question 35:

Question 36:

X Associates undertake to prepare income tax returns for individuals for a fee. They use the weighted average method and actual costs for the financial reporting purposes. However, for internal reporting, they use a standard costs system. The standards, based on equivalent performance, have been established as follows: 

Labour per return 5 hrs @ ₹ 40 per hour

Overhead per return 5 hrs @ ₹ 20 per hour

For July 2023 performance, budgeted overhead is ₹98,000 for standard labour hours allowed.

The following additional information pertains to the month of July 2023:

July 1 Return-in-process (25% complete) 200 No.

Return started in July 825 Nos

July 31 Return-in-process (80% complete) 125 Nos 

Cost Data:

July 1 Return-in-process labour ₹ 12,000

- Overheads ₹ 5,000

July 1 to 31 Labour : 4,000 hours ₹ 1,78,000

Overheads ₹ 90,000 

You are required to compute:

(i) For each element, equivalent units of performance and the actual cost per equivalent unit.

(ii) Actual cost of return-in-process on July 31.

(iii) The standard cost per return.

(iv) The labour rate and labour efficiency variance as well as overhead volume and overhead expenditure variance.

Budget and Budgetary Control

Question 37:

The following details apply to an annual budget for a manufacturing company.

Quantity of raw material per unit of production 2 kg. Budgeted closing stock of raw material 2,000 kg. Budgeted opening stock of raw material 4,000 kg. (Cost ₹ 4,000).

Issues are priced on FIFO Basis. Calculate the following budgeted figures.

(a) Quarterly and annual purchase of raw material by weight and value.

(b) Closing quarterly stocks by weight and value.

Question 38:

Theory

Question 39:

(i) How would you treat the idle capacity costs in Cost accounts?

(ii) State the circumstances in which time rate system of wage payment can be preferred in a factory.

Question 40:

State how the following items are treated in arriving at the value of cost of material purchased:

(i) Detention Charges/Fines

(ii) Demurrage

(iii) Cost of Returnable containers

(iv) Central Goods and Service Tax (CGST)

(v) Shortage due to abnormal reasons.

Question 41:

What is Bill of Materials? What are basic purposes of preparing a Bill of Materials?